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tv   The Call  CNBC  March 15, 2010 11:00am-12:00pm EDT

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we're going to have all the details for you on this one. good morning, larry. >> good morning, trish. i'm larry kudlow. senator dodd to introduce his financial regulation bill later today with questionable uncertain but maybe republican support. steve liesman will have the latest on whether the bill can win. hello, melissa. >> i'm melissa frances for the first time since the 1980s social security is projected to pay out more in benefits than it collects in taxes. in our "call of the wild" we'll debate whether the age limit should be raised. this is "the call" on cnbc. stocks are lower, pressured by concerns over possible money tightening in china that could slow the global recovery from recession. bank shares are lower as senator dodd gets ready to release that financial regulatory reform bill without -- it's unclear how much gop support it has. we'll talk about that in a second. right now the s&p 500 trading to the downside. almost flat on the session.
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down a little more than three points, about 0.3%. the dow trading on the downside by about 11 points. and the nasdaq right now is also in the red by 11 points. almost 0.5%. that's the biggest loser on a percentage basis in the group. what's happening on the floor? >> those global concerns that everyone has about the global economy not really being helped by moody's coming out and saying some of the biggest aaa credit ratings are perhaps in a situation where they may be facing more risk. that said, there are a few chuckles down here. as you know, as i know, as everyone knows, that rating agencies have shown time and time again that they're a little late to the party. the expectation is that some of that might have already been baked into this market. i want to bring in bob pisani. he's got a little bit of good news for us here on this monday morning. hello, bob. you're seeing some good positive emerging trends. >> absolutely. >> let's talk a little bit about those. >> look at the delinquency rates. we're poring over credit card
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numbers. generally the trend is improving. delinquency is your early warning indicator. that's 30 days or more delinquent. all three of these companies reported improving numbers on the delinquency rate. the bottom line is that the portfolio deterioration we saw last year appears to be peaking. that's a really good sign. the bad news is the street's believed this for a while. they thought the numbers would be getting better for months. stocks have run up. remember how they did this? they contracted credit from a lot of the consumer thars os th out there. not just writing things off. >> we've been talking about the m and a of late. there's a deal today of particular interest. you've got one company much smaller than the one it's buying. what is this telling you? >> it's amazing that phillips van huzen went out and bought tommy hilfiger. they own calvin klein and izod.
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the company, it's a $3 billion deal. they're going to go out and bar row $2.5 billion. this is an indication that at least some companies are starting to get more comfortable with the international economic situation and are willing to go out and borrow some money. >> indeed. finally, dividends. let's talk a little pepsi. >> pepsi raised the dividend. i keep bringing this up. 71 companies have raised dividends. this is the most in several years since the beginning of the year in the s&p 500. that's 15% of the s&p. because a lot of companies have not had big runups in prices, some of these companies have amazing dividends altria has a nearly 70% dividend right now. the telephone companies haven't had a big move-up in price recently. at&t, 6.5%, duke energy over 6%. there's a lot of good dividend payers out there. >> looking good. you're looking good, too. larry, some reasons to smile on this monday morning. >> we like smiles on monday.
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industrial production very strong. wall street is facing tougher standards as the senate banking committee chairman chris dodd gets ready to unveil his financial reform bill with republican support questionable but still possible. cnbc's steve liesman, questionable but still possible, joins us with the very latest. >> and i want to break some news to you, larry. a source telling cnbc that banning banks from engaging in proprietary trading will be in the dodd bill that will come out later today in 2:00 p.m. the bill will take the approach of the house bill leaving it up to the regulators. but the dodd version will mandate that regulators ban these activities by the big banks. there are areas of both consensus and controversy in this bill. a person familiar with the talks telling cnbc late last night senators dodd, warner and corker hashed out two important sections of the bill. on others dodd chose to secure democratic votes on his left rather than republican votes on
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his right. richard shelby held out hope that the compromise could be reached. >> we probably conceptually maybe agree on 85% or 90% of a bill. it's a question how do we move it forward. >> cnbc reported friday here that key parts of dodd's bill, there will be consumer protection. it will be inside the fed. it will have rule making authority under the dodd bill some enforcement authority. resolution authority. we understand senator corker was successful in changing the title of that bill actually to liquidation. orderly liquidation. systemic risk. derivative regulation still in the works. reid and gregg are still working. dodd says he's going to accept their work. the fed the big loser in dodd's original bill now a big winner. one big area of change in an attempt to clip the wings of the new york federal reserve bank and limit the influence of the private banks there, sources say
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that new york fed president will be chosen by the president of the united states. not the new york fed's board of directors, larry and melissa. >> proxy access. this is a corporate govern naan issue that is very sticky. >> it's in there as well. i understand in a somewhat watered down way. >> the unions and the libs who want to have whack kac ko-- >> i'm a conservative, larry, who wants more say over pay. >> this is worse than say over pay. this means the company has to list the alternate boards of directors. that's a brand-new step, a giant step. >> let me tell you what i understand. i understand schumer's amendment is in there. but i understand also in a watered down way, without the text i cannot say if you are correct or not. >> will you work on that? >> perhaps we should bring in the other guest? >> let's talk more about dodd's
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attempt to get a nonpartisan financial regulations bill through congress. joining me is cumberland's -- bank stocks are trading down according to our word on the new york stock exchange. what do you make of this from what you hear and what you know and what steve liesman believes he hears and knows. >> well, we're going to have a lot more. banks are worried there's an uncertainty premium in banks and financials right now. once this air gets cleared, we understand more about the bill, we see what responses are going to come out of barney frank after the senate can coalesce. then bank stocks could begin to reflect the outcome and reprice whatever's expected. >> is there anything unexpected or surprising in what you're hearing in the final version of this bill? anything the market isn't expecting? >> no. i think a lot of the details here have leaked out over the
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weekend. i'd be very curious to see what it is that they say on the details that steve just reported. that's kind of interesting about the volcker rule. that might be a surprise in here as we see the language unveiled this afternoon. the key question here is whether dodd d attract any republican votes to make this thing have the aura of bipartisanship in a very splintered town. that's an open question right now. but i think going into an election year, there are a lot of republicans who might want to vote for something like this. really being on the record as blocking wall street reform in an election year might not be a good position. >> that's true. that night not be very good. steve, what i wonder on the volcker rule, is there a way around it? is there a way to spin out the prop trading desk from the bank but still be investigatied in i? >> it seems like when i hear this hard and fast rule there's probably a way around it. >> i talked to a lot of bankers. they don't like this deal at all. >> so they're going to find a way around it. >> maybe. it's going to make it a lot harder. there's no reason if a lot of
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what they're doing is, in fact, on behalf of their clients. i want to point out one thing very quickly. there's this other issue out there which the state attorneys general can come in and enforce the consumer protection laws. this is the federal preemption rule. i'm told that's a deal breaker for the republicans. >> dave kotok, what does the volcker rule do to bank stokes? >> the volcker rule could hurt bank stocks. there again, you're going to change a business model which is why we don't -- >> major revenue driver. >> yeah. we don't know where this plays out. we don't know where you divide big banks and small banks and regional banks, banks which cater to consumers and banks which are large commercial lenders. and how do they compete in a global environment? these are very difficult issues. the one thing i like about the draft bill that i've heard is that the capital that has to be placed, the money that has to be placed in the resolution fund, which is talked about at $50 billion, the banks will have to
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fund it but they will be able to count their funding as capital. that was a big question. it seems to be resolved. >> kotok, get with the -- >> liquidation fund. >> i'm trying to figure out, you got this $50 billion bank assessment, okay, for this resolution fund. blah, blah, blah, blah. but nonbanks, nonbanks may be more expensive. i want to know generically, is this too big to fail section, does this mean the government is going to resolve it or the bankruptcy courts are going to resolve it? because they don't go to fannie mae. they don't go to freddie mac. they don't really go to aig. and we own fannie and freddie to perpetuity, best i can determine, and i don't like that one bit. >> well, look. i mean, under the $50 billion rule i believe it's the government that would be involved. >> right. >> in winding these things down. >> which i think is a lousy idea. that's anti-free market. >> you put the $50 billion in in advance, that way the firms that collapse will have their court
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pay for their own bailout, so the speak. the question is whether $50 billion is really enough. >> the house bill has $4 trillion. >> the way it would work is that the -- the -- the company that's liquidating, the government would have access to the assets of the institution that's being wound down first and then to the fund. so the question is up to 90% of the assets can be used for the liquidation. >> why is that different than fannie mae and freddie mac and why does this bill dodge fannie mae and freddie mac. >> larry, if you keep imposing logic on this project, you've lost your hair already. >> there have been a lot of good ideas we heard along the way that i think have gotten lost. one of them was forcing everyone to eat their own cooking. what i mean by that, when it comes to mortgage backed securities whoever sells it has to keep a piece of it. you can't just package and sell ugly mortgages you don't believe in knowing you're going to make a profit then, you don't have to worry about whether they go bad. that's not in there anywhere,
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right? that's something we heard about early on. steve? >> i don't know. that may be tied up in the derivative discussion going on right now between gregg and reid. it could be elsewhere in the bill. >> it's confusing. >> every time i think i've got it nailed down there's other stuff that comes out. >> dave kotok, can i just ask you, we're giving the federal reserve so much power, government regulation is going to have so much power. look how brilliant they did. now lehman brothers is front and center. 17 government agencies completely missed the lehman brothers book cooking. is credit going to be denied as a consequence of this, david kotok? let's step back for a minute. here we go. let's rely on the government. i know it's popular among voters. how is this going to affect the provision of credit and lending and all that good stuff? >> well, i believe the credit mechanism will heal, and it will heal because of monetary policy, larry. the question is the new fed is going to have much more bias towards regulation and supervision and oversight. look at the proposed composition
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of the new board. and you're going to make the new york fed president, a political appoint appointee, he's blended into the board of governors now already because he's permanent. maybe the new york fed's beha behavior during the bear stearns lehman window which has never had examination warrants a change at the new york fed. their hands are not clean. however -- >> does this make the fed more dovish in its monetary policy because of the regulatory stuff? >> that's a risk subject to debate. the market's priced the dollar a little weaker on the announcement of the changes coming to the board of governors. by the way, christopher dodd is trying to make up for the failure he had for years in appointing two governors in trying to create a legacy before he leaves. his record as chairman of the senate committee is tarnished by fed governor hold-up
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appointments, the mortgage fiasco. this is his last chance at a history book. >> we got to go. thanks for our panel. chris dodd set to reveal his reform bill at 2:00 p.m. eastern. we'll carry his press conference live. when when he come back, aig holding back millions of dollars in bonuses. is this fair for executives? they're not happy. we're going to speak with a lawyer who represents them about their next move. also he's suing. investors jumping back into real estate in a big way. we'll explain and debate whether it's time to invest in housing again. you're watching cnbc, first in business worldwide. national car rental? that's my choice. because with national, i roll past the counter... and choose any car in the aisle. choosing your own car? now, that's a good call. go national. go like a pro. investors are demanding more for their money. good. this time, i'm watching fees like a hawk.
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okay. take a look at crude oil right now. remember last week we tested 83 bucks a barrel? down below 80 bucks right now. $79.27. almost two bucks on the day. 2.5% and sinking. trish? aig will pay out about $46 mill whereon in retention bonuses today. that's about 30% less than previously scheduled. this according to a person with direct knowledge of the arrangements. aig is hoping that by withholding $21 million in bonuses, they will put to rest this whole controversy that has plagued them ever since it was rescued of course by the government in the fall of 2008. but the lawyer for some of these executives who will lose their bonus money that they have been contracted for, he's not happy. he is threatening a lawsuit. and we want to bring in gary
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faylin. great to see you, gary. you're not happy here. these are people that you say were contractually promised this money. and this is essentially breaking contract law? >> that's right, trish. my clients feel just as you would feel if you woke up this morning and had 25% of your pay reduced without any explanation as to why it was reduced. it's a blatant violation of connecticut wage statute as well as a breach of contract. >> what are you going to do about it? >> the first step, i think that -- or i should say the next step will be to proceed with legal action. i don't see how there's any other way unless somehow aig decides to honor the promises that it has repeatedly made in writing as well as in person to their former employees. >> well, gary, with all respect, i must disagree on all your points. when i woke up in the morning and i saw that the taxpayers had just bailed me out for $180
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billion because of mistakes that i made i might feel a little differently. i don't think t.a.r.p. money banks or insurance companies should get a nickel of bonuses. not a nickel. if aig was in bankruptcy court where they belonged, they wouldn't get any bonuses. why is this any different? >> because, larry, the fact that t.a.r.p. money was paid for this has no relevance to connecticut law. and these were not necessarily the people who caused any of the losses. they have contracts. if they were doing their job, aig could have fired them. they didn't. >> you've already broken those contracts, my friend. >> they didn't break -- >> i beg your pardon. the mere fact that these bonuses have already been reduced, the mere fact that there is a bor n bargaining negotiating session goes on says in effect the contracts have been ripped up. i want to rip them up all together. >> they haven't been reduced. >> of course they have. gary, you're negotiating -- you already had one reduction which wasn't met nits entirety. now there's a second reduction.
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what i'm saying is the contract has already been nullified. >> well, it hasn't. it hasn't been. and the money is owed. and it should have been paid today. >> let's talk about the talent that's actually working there. one of the big fears that comes up, that people keep coming back to, is that you're not going to be able to get a lot of these folks to work for less money. now, there's a whole other camp that says, hey, you know, a paycheck's a paycheck. in this day and age, it's worth something. but, gary, talk to me about whether or not you think some of these folks are going to continue going in every day working as hard as they're working when they're not getting the money that they think they deserve? >> well, i think certainly the loyalty, it couldn't be nearly what it once was and what it used to be. certainly when your employer just says we're going to pay you 75% of what you're entitled to, then certainly they're less motivated and people leave. >> why not just use a computer program. this financial products division, they're just unwinding
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these very bad trades. that's all they're doing. they shouldn't be given bonuses for that. i'm sorry. taxpayers are financing. they're lucky they have jobs. >> these are no different -- these are not bonus payments. these are retention payments. they met the qualifications. they're entitled to it. >> look, if you're taking them down -- this is the part. i don't understand your legal case although i am not an attorney, lord knows. you have already reduced substantially from $45 million pledged, they said they'd knock it down to $19 million. now they're doing the same thing. here was the original retention. and now they're going to knock it down. it seems to me if i were sitting on a jury and you take this thing to court, i would say, well, gee whiz, you've already abrogated that contract. >> i wouldn't pick you on my jury, larry. >> it would be a hard play having larry on your jury. >> look, you could take -- >> i think it's going to be hard with any jury, larry. >> so do i, trish. that's where i'm going. the fact of the matter is that this process, gary, is already
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getting away from you. you're making an argument about the sankity of the contract that has already been overturned by this whole government process. it's already been overturned. >> larry, it's not been overturned. their lawyers have said they're entitled to it. ken feinberg has said they're entitled to it. >> but less. ken feinberg said you should get less. >> he said you should get less but -- >> that's written in the contract. >> no, it isn't. the fact that aig breaks the contract doesn't mean they're not entitled to all the money. >> you know what, no disrespect to you, my friend. i'm sure you're a great lawyer. no disrespect to the people who are working at aig. my simple kudlow rule about this, you're on t.a.r.p. money, you forego any bonuses, retention pay, you're out of here. >> larry, there's no political unpopularity exception under connecticut law. i'm sorry. >> okay. we're going to leave it there. thanks so much, guys. we appreciate it. coming up, more problems for social security. would raising the retirement age give the program much-needed
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stress relief? >> i like that. first up, we're going to tell you who's buying into the housing market in a big way right now and whether you should also invest in housing. think about that. we'll be right back. stay with us.
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all right. some positive news for merck. a blood thinner appears to be safe and effective. right now merck is trading up by 0.5%. a bullet sign in the housing recovery. there's been a surge of investors snapping up bargains, paying for them in all cash. the question is, is now the right time to jump back into real estate? diana olick joins us from washington with some answers on this. >> hey, trish. you're right. they were considered the culprits in the housing crash. bad guys. investors, freklators who used free money mortgages to buy and sell properties at a fast clip, driving up prices and inflating the bubble. now they're back and they may be saving the market. >> there's great deals out there now because a lot of people don't think they have options. >> tom has been investing in d.c. area housing for the last
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decade. while he's felt like a lone soldier during the past year, he's starting to see movement. in fact, you can see it in the all cash share of buyers. normally 10% of the market nationally, now 26% in january. investors have to use cash because of the tight mortgage market. in more distressed areas like las vegas cash buyers made up half the market in january. the same trend in phoenix where all cash buyers rose to 40% in january. >> all cash helps. helps a lot. cash or cash equivalence, hard money or private money. you might raise money to do your investments. you're going to have a hard time with bank financing as an investor. >> even flipping the back. data quip reports in san diego, one of the hottest investor markets during the housing boom, 4.5% of homes sold in january had been owned for less than six months before. a year ago the flipping rate was about half that. while flippers don't create the most stable housing market, they
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are serving to eat up foreclosures and create demand, at least on the low end. that helps stabilize prices. investors today are going in with expectations of a longer time horizon and a smaller return. so really keeping it real. for more, of course, on all this go to the glog. realtycheck.cnbc.com. >> thanks so much. let's talk more about housing if now is the time to invest. joining us is ceo of thor equ y equiti equities. pat, 26% going all cash. that's pretty surprising. but i actually talked to developers over the weekend who are saying the all-cash deal is back in a big way. where's all this cash coming from? >> well, we're seeing the cash come from a couple of different places. we're seeing a number of different people who have been saving for years and they decided to go into the place they want to retire in. they've been using that. we also have seen a number of people who've decided they're uncomfortable in the market and they've pulled money out of the market to go into real estate -- >> the stock market, you're
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saying. >> the stock market to be able to go out. they're uncertain about the future of it and they like having hard properties. third we're actually seeing funds made up of investors where they're actually pulling cash together from a variety of different investors and coming and investing on a hedge fund pool sort of. >> joe, does this mark a bottom in your mind when we see all this cash come in? do you think -- anecdotely i've talked to a lot of people who think we've put in a bottom in this market. interest rates maybe potentially beginning to go up. maybe the housing market is bottoms. a lot of people have been sitting on the sidelines for five or six or ten years saying maybe this is the time. >> we've been saying the same message now since probably 2008. we feel this is a company at thor equitieequities, it's the bottom. three dynamics working at the same time. sellers finally relenting just because of the pressure of what they're dealing with in expiring loan, underwater loan or just the carry cost they can't handle. one. two, lenders that are finally
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becoming impatient and are foreclosing and then starting to liquidate. last and certainly not least, but a buyers market where people are finally tired of waiting on the sidelines. these are normally the three forces that come together to make a bottom of a market. >> okay. that said, isn't this very much, pat, market specific? i mean, you can't just blindly go out there and invest in real estate right now. you need to look at individual markets? >> that is absolutely correct. you know, i think the report that you just had talked about the high level of cash in places like las vegas and phoenix. one of the things that we've seen is that markets where there's been a high level of foreclosures and there's been a significant price decline have been very heavy for all-cash buyers. we think for two reasons. first of all, those investors are able to come in and get great deals at prices that they think are a good value for them. second, a number of the people who've been foreclosed on or lost their home are creating a demand cycle for the ability to
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rent out or lease out those properties that the investors are buying. so you're getting both low prices and high demand in some of these areas where foreclosures have been very high in the past. >> there's no liquidity here, right? if i go in and i plank down a lot of cash for a property, the reality is i could be stuck with that property for the foreseeable future? >> i would -- >> go ahead, joe. >> all right. i would add two things. it really is a tale of two cities, what's going on in our country. you've got first the global gateway cities that aren't so much tied to the economics only of our country but the economics of the world, whether it's a booming brazil, a booming china, booming india. and it's got strength in markets like new york. we've got strengths in markets like san francisco. you've got houston where housing is actually selling at a very, very fast pace. >> in other words i've have liquidity in those markets but not necessarily detroit. >> exactly. markets like detroit, the rust belt, i'll take it back to economics. in times square i was looking up
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only two weeks ago. there are two signs in times square billboard that were held by gm for 30 years. you know who's got it now? kia and hyundai. the rust belt isn't seeing the liquidity. although for those that want to brave it, there are obviously opportunities at cheap prices. >> okay. we're going to leave it there, guys. thanks for joining us. we have special coverage all day tomorrow on cnbc. realty check housing battles back. will home buyers return? can they get a mortgage if they do want to buy? is it time to get back into housing stocks? that's all day tomorrow on cnbc. larry? up next, for the first time since the 1980s, social security is set to pay out more benefits than it collects in taxes. so should the retirement age be raised to preserve the system? >> the reckoning day is approaching here. investigators unable to recreate the conditions of the runaway prius. what does this mean for toyota and prius production?
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phil lebeau is going to join us.
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for over 20 years social security collected more money in payroll taxes than it paid out in benefits. but not anymore. this year for the first time since the 1980s when congress last overhauled social security, the retirement program is now projected to pay out nearly $29 billion more in benefits than it collects in taxes. right now you can begin collecting social security at age 62. should that age limit be raised?
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let's bring in chris wilson, ceo of wilson research strategies, and miles, president of demos. miles, go to you first. to me, the only -- literally, the only way we're ever going to get out of bankruptcy for social security, probably medicare, too, but we'll stay on social security, is to extend the eligibility to gradually month over month, year over year, move that thing out to something like 72, 73. what's your take? >> i actually think that's not the right answer. i think social security for one thing is not really going to be in any fiscal trouble for 30 or 40 or 50 years. the projections are of a system that will be solvent for a long time to come. the real issue is i think people's retirement security has eroded dramatically over the last few year. their savings have gone down. their 401(k)s have tanked. their home equity has tanked. so you're in a situation where many, many more people, especially people who are not high income people are looking at social security as the real anchor of their retirement. and i think making that --
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cutting those benefits is probably the wrong way to go. >> chris, that is true. i think what miles says is true factually. now there's been a run on the bank. everybody wants to retire early. so the benefits are going to be, you know, accordingly knocked down and the system is deeper in bankruptcy. so, once again, how to get out of this? >> i think we're in a situation where you've got to do one or the other. it's either you're going to cut benefits, you're going to cut medicare, or you raise the retirement age. i think it is actually a more reasonable way and a less painful approach to raise the retirement age maybe inch it up over a few years, get to a position where people aren't expecting and aren't planning on it. but miles' point is correct. i think we're in a challenging time now. it's probably the most difficult time to do it in the last 20 years. it's a shame we didn't tackle this back when we had the opportunity to. >> way back when? >> yeah. when the stock market was at its height and we had plenty of equity in our homes. now the world has changed. it's more difficult to get it done. >> i want to share with you something from this month's
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"foreign affairs." the author writes according to the congressional budget offices alternative fiscal scenario which takes into account likely changes in government policy, public debt could rise from 44% before the financial crisis to a staggering 716% by 2080. then it looks at the extended baseline scenario in which you would assume current policies remain the same and you're still at a figure that's close to 280%. miles, i don't know how the heck we're going to be able to afford this. what's wrong with just bringing the age down bit by bit? we're not talking about going out and telling someone who's 61 years old you can't retire next year. but you can tell me you can't retire at 62. what about people in a younger generation? what should they be able to retire so young? >> obviously doing it gradually is better than a huge hit. but there are plenty of other ways to make social security more solvent. right now the social security tax is capped at a fairly low
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level. if you just raise that cap even a few thousand dollars not to mention taking it away entirely you'd get a lot more strength in the system without cutting benefits or telling people they can't retire. >> we have already been doing that. we have already been doing that. heck, to pay for obama care now, the medicare payroll tax is going to be applied to capital gains on investments. miles, to trish's point, we've already been doing that. how high are you going to raise tax rates? some of these estimates says the payroll tax has to double. even at that point you might not be able to pay for social security. >> i don't think that's close. we've also been reducing the benefits. in 1983 the reductions are 30% over a lifetime of a person. i think the idea is to guarantee people real retirement security, pay for it fairly and adequately from people who have the jobs that can generate the income. that's a fair way to go as opposed to cutting benefits. a lot of people are not into the anchored jobs or my job. they need the retirement income. >> it wouldn't be the worst thing in the world if you told
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everyone right now that's in their 20s, that's in their 30s, guess what, you can't retire at 62. i don't think anybody would be that worried. because, chris, frankly, i don't think anyone in this younger generation really anticipates having much in the way of social security there for them when that day arrives anyway. >> of course you're right. i would even go further than that. i'm in my early 40s and i can tell you, this is a conversation that i talk about with friends my age on a regular basis. and there is -- we've pretty much written off social security. i don't think anybody my age or younger plans on it to be there for us. so it would be reasonable, completely reasonable to say to us we're going to raise that age up, inch it up over time, allow it to exist for the baby boomers and those who have paid into it. then from there allow us to plan for our future. >> by the way, let's not forget that if we're all paying for the baby boomers in their retirement through social security, our tax rates are going to have to go up as a result of that. >> huge. >> it's a huge liability. >> the other thing is, i'll address this to miles, i guess. look, miles, the younger people
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should have more options. they should have an opt out. if they want. they should have the choice. they could invest in bank deposits. they could invest in bonds. they could invest in stocks. you should have those tax free savings accounts if you ask me. the other point i want to make is if you grow the u.s. economy, this is the point that doesn't get enough ventilation and visibility. besides giving the younger generation the opt-outs, if you grow the american economy at the high, at the optimistic level that the trustees put out, then you doenn't have a problem. that gets me back to taxes. you keep jacking up taxes, you won't grow the economy. low growth economy -- >> economic bankruptcy is a huge part of the problem. there may be many different ways to get there. i guess i would say all of the things that people have promised, 401(k)s, put your money in alternative investments, into savings accounts, borrow off the equity of your home, all the things except for social security have eroded dramatically over the
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last few years. >> let's get creative on this. miles. why not have a hybrid? why not use a little creativity here? the reality is, we're in a real tough situation. >> if, trish, if you're going to say to the younger group coming up, we're going to expand your -- we're going to raise your entitledment period, eligibility period, retirement period, when i say along with that as part of the deal, it would be a new deal for social security, give them options. give them private options. let them manage their own money. if you raise the payroll tax repeatedly, which i fear is going to happen, you're going to decimate the u.s. economy and social security will get worse, not better. >> larry, that's right. if you allow people our age to have options and then to be able to invest in a level that you understand what you're doing, you have a little more education so that you can begin to plan for your future and not have that safety net to rely on, i think it does actually create a higher level of responsibility. it causes somebody to plan ahead. it will help take care of the system. >> chris, you could invest your
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money in an fdic guaranteed savings account. >> then it's yours. it's your money and it's not a transfer of payment. >> that's right. >> that's right. >> i have a 401(k) that's worth less now than it was four years ago. what kind of retirement security is that? >> but over 30, 40 years. this is a -- >> you start when you're in your 20s. you plan ahead. it creates a much more reliable system that we can all count on. >> that's great for high-end people. what about the middle class? >> you start in your 20s. if you're putting a couple hundred dollars a month or year it's still going to grow over time and take care of you. it's just a matter of planning ahead. it's going to be far more reliable than social security today for somebody who's 20 years old. >> i don't agree. >> i know you don't. when we come back, toyota and the government raising new questions about the alleged runaway prius incident. >> was it a hoax? our phil lebeau will have the latest details. (announcer) we're in the energy business.
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but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business. chevron.
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okay. welcome bab, everyone.
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st. jude medical is on the rise. the catheter procedure worked better than medicine. take a peek. st. jude medical up almost 7% there, melissa. the government and toyota raising new questions about the latest incident involving a supposed runaway prius. toyota shares, see how they are trading on the day. up just slightly. 0.4%. phil lebeau has the latest. is there a hoax? >> i don't think there's any way of knowing it's going to be a hoax unless mr. sikes comes out and says i made the whole thing up. at this point all you can say is the results cannot be confirmed. that's tlatest when you look at what happened with this prius last monday. the national highway traffic safety administration without a preliminary analysis saying they couldn't duplicate the complaints. they even say, we may never know the cause of the runaway prius last week. toyota's analysis of the results, we're going to hear about those later on today. toyota technicians checked the prius last week along with investigators from the federal government. yes, they did find that the brakes on the '08 prius were
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completely worn down. that backs up mr. sikes' story who, by the way, is not changing his story. he's sticking by it that the car was out of control and he could not slow it down. that doesn't mean he's making this up. the former head of the national highway traffic safety administration says it's quite common people involved in unintended acceleration incidents to not have their story verified when they look at the car later on. >> i see no other case where either toyota or the national highway traffic safety administration have reproduced the problem. so the fact that they didn't in this case means nothing to me. >> while the prius investigation continues, prius production is being cut in japan. that's according to a report out of japan. remember, this is the best selling car in japan. so a cut in production of the prius is important not just here in the united states, but also over in japan. remember, the prius plant planned for mississippi, that's on hold until they decide what's going to happen in the future.
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there you see shares trading up over $77 a share. so larry, melissa, i know a lot of people want to say it was a hoax. there's going to be no way of knowing unless they can get mr. sikes to come out and say i made it up. >> how many times have you taken the car to your dealer and they say, sorry, we can't duplicate the experience you have. we don't hear the noise. when you bring it in, they can never hear it again. i don't know. we're all suspicious. at the same type, just because they can't find it. larry, go ahead. that's my two cents. >> one of the rare moments, i have no comment on this point. it's extremely rare. "power lunch" is coming up at the top of the hour. sue herera has a lot of comments. >> i agree with you, melissa. i've been there. >> we don't hear it. you're crazy. >> that's right. coming up on "power lunch," darren rovell will join us and talk live with tim finchem about the pending return of tiger woods.
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also, best selling author, newly minted hollywood mogul and financial writing michael lewis joins us. "the big short: inside the doomsday machine." also a few surprises. should the u.s. finally get tough on china? we have a terrific debate on that, larry, coming up. which i know you'll have a comment on. >> have a great show. i've got a few twhauhoughts on . when we come back, march madness kicks off with the release of the ncaa brackets. plus, the stock you're going to need to watch as we head into afternoon trading. we're going to be right back.
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welcome back to "the call." a record 7.5 million loans are in some stage of delinquency or foe cl foreclosure with an additional 1 million in reo. one-fifth of all loans delinquent for a year still not moving to foreclosure. the pace of loan deterioration has slowed. if you're keeping score, wells fargo was the busiest residential mortgage lender last year. that from mortgage daily. total residential mortgage production increased. the street is looking for the number to hold unchanged after the index rose two points in february.
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thanks, diana. march madness is kicking off this week with the release of the ncaa tournament brackets. cnbc's darren rovell is breaking down the bracket in a different way. >> pundits have gone through the brackets a million times today. today we're giving it the cnbc treatment. we're going to go through the brackets with a financial take. let's start out with the players who of course make nothing. that includes duke junior forward kyle singler who earned zip from the sales of his jersey. each school only gets 350 tickets for its first round game. at wisconsin you would have to donate a minimum of $1,000 to even be considered. $1,000 is also what it would cost you if you're caught betting in a pool in the state of michigan. that's technically speaking. the attorney general hasn't fined anyone recently. $25,000. that's what coach tom penders made. his team got a 13th seed. they'll play maryland in the
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first round. how much is each game worth? the ncaa pays $222,000 for each game a team plays. that goes back to the conference. it's paid out over the next six years, meaning one win is worth $1.3 million for a team's c conferen conference. the best part of the tournament, have-nots sometimes beat the haves. check this out on lehigh and kansas. kansas spends $7.2 million on its basketball program. more than lehigh. the number that i see all the time is this lost in productivity. $1.8 billion, larry, i'm going to debate that forever. how much do we lose on an average day? back to you. >> that's true. there are plenty of other things people are doing online. >> right. >> they just happen to be doing march madness. time for "call to action" on stocks you need to watch during afternoon trading. brian shackman. >> checking my facebook account. sorry about that. let's take a sector approach
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starting with the s&p 500. consumer staples outperforming by a wide margin. we touched on walmart, the citi up grate, pepsi dividend high. phillip morris international making a nice move. also partially due to barons which points out a 4.6% dividend yield. on the other side of the ledger, energy. energy by far the worst sector. every energy name in the s&p 500 is down. consol the biggest loser of the day. the ceo will be on "fast money halftime report." check that out. back to you guys. >> thanks so much. i think that's going to do it for us here on "the call." i'm melissa francis. >> thanks for watching, everyone. i'll see you today on "the closing bell." >> i'm larry kudlow. i'll see you tonight on "the kudlow report," 7:00 p.m. eastern daylight time or some
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such thing. "power lunch" is up next. ♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco. hey can i play with the toys ?
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